Currently, money transfers between banks may take up to several days due to numerous intermediate verification steps involved in the process. Conventional interbank transactions are realized by either transferring deposits to/from each bank, or by using a central bank. Using a central bank makes it possible in some cases to simplify the system and expedite settlement resolution. However, each transaction going through the central bank according to known systems requires numerous processing and verification steps, which consume computational resources and necessitate complex verification and security systems, thereby resulting in high transaction costs. Moreover, banking systems which store large volumes of financial information in order to perform settlement resolution have been targeted by specifically crafted hacks, malware, and data corruption.
In recent years, distributed ledger technologies have attracted considerable interest from both academia and industry alike. Unlike traditional database technology, distributed ledgers require neither a central administrator, nor a central data store. Instead, the ledger which can also be referred to as the block chain or, more specifically, the transaction history, is replicated among the nodes in the system, and a consensus algorithm ensures that each node's copy of the ledger is identical to every other node's copy.